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Gustav Zwiegelaar, regional manager at SA Home Loans in the Western Cape, advises:

There are no hard and fast rules to indicate at which stage
credit to a consumer will be refused but, in general terms, credit providers
will not want to engage with a consumer once the payment profile on their
credit report reflects that accounts are not well maintained with regular
monthly payments.

This is compounded by default data listings and a judgment
is generally regarded as an absolute exclusion to qualify for a loan.

Responsible credit behaviour is a necessity when one plans
on obtaining credit finance of any kind in future. Knowing and understanding
the exact details of your credit status will empower you to take appropriate
action to ensure that you qualify for a loan in future.

I suggest that the reader obtain a credit report and
approach someone who will be able to accurately interpret the information and
provide guidance.

Consumers are entitled to a free copy of their credit
reports in their month of birth.

What consumers should know about credit reports and consumer
conduct:

A credit report contains general personal information, such
as ID number, address and contact details, marital status, employer details and
so on, which is handy to have from an assessment point of view. The important
information is the following:

Payment profile:

This is a summary of the monthly credit commitments for a
consumer. It lists all the accounts payable, giving the monthly instalment due,
the opening balance and the current balance. For each account there is also a
24 month history of payment, which reflects accurately whether any accounts had
not been paid on time for any given month during the 24 months mentioned.
Typically consumers have credit cards, clothing accounts, store accounts, motor
vehicle payments, insurance contracts, telephone bills and home loans, all of
which are listed with detailed account payment behaviour reflected.

Failing to make payment for any such account is indicated by
a digit which reflects the amount of months such an account is in arrears by.
This is usually the best indicator of how future accounts will be handled. An
account that remains unpaid for a period of nine months may thus be reflected
as 0I1I2I3I4I5I6I7I8I9I. An account which was unpaid for a couple of months and
then brought up to date may look like this over a six month period:
0I1I2I1I0I0I.

Default data:

This is a summary of any accounts that had remained unpaid
for an amount of time that had been sufficiently long for a credit provider to
take action. A credit provider will list the client as a “defaulter”. This is
viewed more seriously than a skipped account payment and indicates that the
credit provider had tried to collect payment but payment was not made and
usually leads to legal action being taken. The payment profile may look like
this: 0I1I2I3I4I5I6I7I8I9ILI-I-I-, the “L” indicating that it was handed over
for legal action to be taken.

Account handed over:

Once a consumer had been listed as a defaulter a credit
provider can hand the matter over to a legal expert to litigate for payment of
the account. The litigator will seek payment via a legal process and, should
payment not be forthcoming escalate the matter to court.

Judgement taken:

This indicates that an unpaid credit account had been
through the legal process and presented to a court where judgement was handed
down against the consumer for non payment of an account. This is also commonly referred to as
“blacklisting”.

At this point the account remains payable, but not only
this; once settled the judgement remains in effect and can only be removed
through the judicial process in a court of law and usually with the consent of
the credit provider.

Enquiries on consumer:

This indicates which institutions had made enquiries on a
specific consumer and when. Usually consumers with a poor credit history have
more enquiries made as they often shop around for credit. A combination of poor
credit behaviour and a high number of enquiries can be a “red flag” to a
potential credit provider, especially if the enquiries are made by providers of
short term credit and personal loans. On the other hand, when consumers
purchase homes or vehicles it is not uncommon to see numerous enquiries from
different institutions as consumers shop around for the best credit deal.

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financial service providers.

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* Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

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